United States District Court, D. Nebraska
MEMORANDUM AND ORDER
M. Gerrard Chief United States District Judge.
matter is before the Court on Arthur J. Gallagher's
motion to dismiss (filing 54) Philadelphia Indemnity
Insurance Co.'s third-party complaint. For the reasons
set forth below, that motion will be granted.
explained in the Court's prior Memorandum and Order
(filing 16), this suit involves a commercial insurance policy
issued to the plaintiff, the City of South Sioux City,
Nebraska by the primary defendant, Philadelphia. See
filing 1 at 3, filing 1-2 at 10. Under that policy,
Philadelphia agreed to indemnify the City for losses
sustained as the result of environmental contamination.
See filing 1 at 3, filing 1-2 at 10.
October 2016, the City began sending its sewage to Big Ox
Energy, LLC, a waste disposal provider located in South Sioux
City, Nebraska. Filing 1 at 2. Big Ox would remove methane
gas from the City's sewage and discharge the treated
waste back into the City's sanitary system
(i.e., sewage system). Filing 1 at 2. But soon after
the sewage returned to the City, residents began reporting an
intense and unpleasant odor emanating from their plumbing.
Filing 1 at 2. At some point, the residents discovered that
the odor was the result of hydrogen sulfide gas that had
backed up in the City's sewage system. Filing 1 at 3.
Those residents filed tort claims against the City for
property damage and bodily harm caused by the odor. Filing 1
to the City, the backup of hydrogen gas was a result of
contaminated sewage that had been discharged from Big
Ox's facility. See filing 1 at 3. So, the City filed a
claim with Philadelphia seeking indemnification under its
environmental liability policy. See filing 1 at 3, filing 1-2
at 10. Pursuant to that policy, Philadelphia agreed to
indemnify the City for losses "arising out of
contamination on, under or migrating from [the] insured
location"--which the policy specifically defined as 1615
1st Ave, South Sioux City, Nebraska (i.e. the
address of City Hall). Filing 1-2 at 14 (emphasis omitted).
The policy also contained a "non-owned location"
endorsement which provided additional coverage for damages
"arising out of contamination on, under or migrating
from a non-owned location." Filing 1-2 at 28 (emphasis
omitted). Philadelphia denied the City's claim, and the
City filed this lawsuit against Philadelphia. Filing 1 at 3.
this lawsuit was initiated, Philadelphia filed a third-party
complaint against Arthur J. Gallagher Risk Management
Services--an insurance broker that, in this case, had
obtained the environmental liability policy from Philadelphia
on behalf of the City. See filing 52 at 2-3.
Specifically, Philadelphia sued Arthur Gallagher for a
variety of state law claims including: (1) negligence, (2)
misrepresentation or concealment, (3) indemnification (common
law), (4) contribution, (5) indemnification (contractual),
and (6) breach of contract. Filing 52 at 5-8. Arthur
Gallagher now moves to dismiss each of those claims, or
alternatively, to sever those claims from the initial
litigation between the City and Philadelphia. Filing 54.
STANDARD OF REVIEW
complaint must set forth a short and plain statement of the
claim showing that the pleader is entitled to relief.
Fed.R.Civ.P. 8(a)(2). This standard does not require detailed
factual allegations, but it demands more than an unadorned
accusation. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). The complaint need not contain detailed factual
allegations, but must provide more than labels and
conclusions; and a formulaic recitation of the elements of a
cause of action will not suffice. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). For the purposes of a
motion to dismiss a court must take all of the factual
allegations in the complaint as true, but is not bound to
accept as true a legal conclusion couched as a factual
survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a
complaint must also contain sufficient factual matter,
accepted as true, to state a claim for relief that is
plausible on its face. Iqbal, 556 U.S. at 678. A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged. Id. Where the well-pleaded facts do not
permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged-but has not shown-that
the pleader is entitled to relief. Id. at 679.
whether a complaint states a plausible claim for relief will
require the reviewing court to draw on its judicial
experience and common sense. Id. The facts alleged
must raise a reasonable expectation that discovery will
reveal evidence to substantiate the necessary elements of the
plaintiff's claim. See Twombly, 550
U.S. at 545. The court must assume the truth of the
plaintiff's factual allegations, and a well-pleaded
complaint may proceed, even if it strikes a savvy judge that
actual proof of those facts is improbable, and that recovery
is very remote and unlikely. Id. at 556.
deciding a motion to dismiss under Rule 12(b)(6), the Court
is normally limited to considering the facts alleged in the
complaint. If the Court considers matters outside the
pleadings, the motion to dismiss must be converted to one for
summary judgment. Fed.R.Civ.P. 12(d). However, the Court may
consider exhibits attached to the complaint and materials
that are necessarily embraced by the pleadings without
converting the motion. Mattes v. ABC Plastics,
Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003).
Gallagher moves to dismiss Philadelphia's third-party
complaint in its entirety. Filing 54 at 1-2. As noted above,
that complaint includes six state law causes of action. Those
claims, however, which generally fit into one of two
categories: (1) tort allegations or (2) contract claims. The
Court will consider Philadelphia's contractual
allegations--which tend to provide general context for the
parties' dispute--before moving on to Philadelphia's
BREACH OF CONTRACT
center of the Philadelphia's third-party complaint is the
an agreement between Philadelphia and Arthur Gallagher called
the "Preferred Producer Agreement." See
filing 58 at 8. Under that agreement, Philadelphia claims
that Arthur Gallagher must indemnify Philadelphia for Arthur
Gallagher's errors and omissions. See filing 58
at 8. And according to Philadelphia, Arthur Gallagher's
"blatant failure to disclose material facts concerning
the insurance application," amounted to an error or
omission under the Preferred Producer Agreement and thus,
Arthur Gallagher breached the terms of that agreement.
See filing 58 at 8.
state a breach of contract claim, the plaintiff must plead
the existence of a promise, its breach, and damage.
Henriksen v. Gleason, 643 N.W.2d 652 (Neb. 2002).
There is, however, little, if any, information contained in
Philadelphia's third-party complaint explaining what
promises were actually made in the Preferred Producer
Agreement. In fact, the only provision of the agreement
mentioned by Philadelphia is the following:
Each Party shall defend, indemnify and hold harmless
[Philadelphia] . . . from and against all liabilities,
damages, penalties, costs and expenses (including reasonable
attorney's fees) arising from or related to any
third-party allegations, suits, claims (actual or
threatened), actions or proceedings (each a
"Claim") together with all damages, liabilities and
costs (including attorney's fees and expenses) arising
from: (i) any error or omission by [Arthur Gallagher] or
[Arthur Gallagher's] employees, agents or other
representatives in connection with the performance of its